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The present rural India with a substantial improvement in purchasing power presents a growing potential for telecom operators. Indeed rural consumers have become the prime target market for every consumer durable and non-durable like electronics, automobiles, etc. However, these are the areas still characterized by low per capita income, low literacy rates, low level of industrialization, and poor agricultural productivity. These characteristics of rural India limit its capacity for consumption of goods and services. However, with the telecom tariff having come down to the lowest level, there is ample scope for expansion of telecom networks in rural areas.

The Telecom Regulatory Authority of India data shows that rural mobile phone connections stood at 39.46 mn as of June 2007. With a total subscriber base of 185 mn in that month, rural subscribers formed a formidable block of 21.31% or over one-fifth of the total mobile user base in India.

Rural on a High
State-owned Bharat Sanchar Nigam (BSNL) commands the lion's share of rural mobile phone users by virtue of its massive countrywide network coverage. Still, rural mobile penetration is pretty low, just 4.92%, though it has touched double digits in some prosperous states like Punjab, Kerala, and even Himachal Pradesh. However, overall rural penetration remains way below the 43.88% mobile density in urban areas.

Rural India, experts say, represents the next big growth opportunity for mobile service operators. Commenting on the data, TRAI chairman Nripendra Misra says that the next phase of mobile phone growth would come from the hinterland. Operators need to roll out infrastructure rapidly in the under-served areas of the country, he adds. “Of the next 250 mn users who will go mobile, as many as 100 mn will come from rural India,” he says.

It is perhaps because of this that TRAI has asked the Department of Telecom (DoT) to sanction incentives for rolling out mobile networks in rural India. In its recent recommendations on licensing reform, the regulator asked the government to give incentives for rural networks by reducing the levy charged for development them. BSNL director (finance) SD Saxena says that nearly 70% of all future mobile growth in the country would come from rural areas.

“People in rural areas have the money and desire to go mobile. There is a lot of scope for growth,” he says. BSNL has recently contracted purchase of over 22 mn mobile connections; a significant portion of it will go into semi-urban and rural rollout.